Thank you, Mr. Chair.
By way of background, Calgary Transit is a division of the City of Calgary. We currently operate just over 1,000 buses in our fleet at the moment, all of which are powered by diesel engines. Our fleet varies in age from some brand new buses that we've just taken delivery of to some that are probably over 25 years old. A fleet of that size at the moment currently uses about 26 million litres of fuel per year to deliver service.
One of the issues we obviously hit up against at the moment is the increasing cost of diesel fuel, plus the volatility of the fuel market as well. This is to such a degree that with our current usage, a small increase of around about 4¢ per litre of fuel adjusts our budget by more than $1 million per year. That was our first introduction to where our energy problem was in terms of managing our fleet.
On a more social level we were also experiencing problems with emissions from our older buses, and noise pollution from buses running through residential areas and in the downtown area as well, primarily associated with our older fleet.
Just so everybody's aware, in terms of a bus fleet, buses typically sit and idle probably 50% of their duty cycle. So they're only moving half the time; the rest of the time they're just sitting and idling.
These kinds of issues associated with the environment and the noise, as well as the cost issues we were seeing, led us to investigate some alternative technologies. We looked primarily in two areas, hybrid buses and CNG buses.
Our investigation looked at what we first experienced over 20 years ago with CNG, which was marginal success. The buses themselves worked particularly well. The issue we had with CNG 20 years ago was more on the infrastructure side as well as with the fuel delivery system. It wasn't quick enough to be able to allow us to operate a fleet of any significant size, and it was a little unreliable as well in terms of a fleet delivery system. That system ended about 15 years ago, and we haven't really looked again since. But the market and the current environmental pressures we're under have made us look elsewhere.
We did look at a number of CNG installations across North America. We looked at L.A., Atlanta, Boston, and New York. We did do some phone interviews with other agencies. Hamilton was a major one, obviously, that we talked to, as well as some of the other agencies throughout the U.S. It looked more and more as though CNG was the direction in which we needed to go.
In our direct comparisons with an electric hybrid vehicle, there were a number of issues we hit up against. The capital costs associated with a hybrid bus is about 50% premium, so just for ballpark numbers, a regular size, 40-foot bus is usually around the $400,000 mark. To make that a hybrid bus, it's an extra $200,000 premium on top.
We did speak to some of the major hybrid manufacturers, BAE as well as Allison, and we did some extensive life cycle costing studies with both of those agencies. The return on investment for those vehicles was in the twelve-year period. With a bus only typically having a life cycle of around 12 to 15 years it didn't make any sense at all to pursue the hybrid option, so the CNG option was the one that came to the forefront, really.
We held a number of discussions with major gas suppliers in Calgary to look at various options. There was a lot of interest from their part as well as on our part, primarily looking at things like long-term fixed price fuel contracts. Obviously the price of the fuel was significantly less and they would work with us on that. There was even some talk about possibly contributing towards some of the infrastructure costs, which was going to be the major driver, or the major barrier I guess for us, to implementing CNG.
As our study carried through, CNG looked to be the direction we wanted to go in. They did hit a barrier in terms of what the minimum size was that we needed to look at in terms of fleet size. It looked as though we needed to get about 150 buses before we could get any cost benefits from the capital costs of the infrastructure as well as the capital costs associated with the vehicle.
This wouldn't necessarily be a simple solution for a small agency, but it's certainly a viable option for an agency the size of the city of Calgary, or city of Ottawa, that kind of size.
So a proposed solution originally was to modify one of our existing facilities to make it CNG-compliant and procure 200 CNG buses. We were fortunate that since there were a number of projects aligning at the same time for building rehabilitation as well as fleet replacement, it made sense at the time.
We were looking to get longer term fuel price stability. There were significant improvements, in terms of reliability, that we were expecting to get. Current diesel buses, so you're aware, have a significant amount of equipment on the post-exhaust processing side to reduce emissions. None of that is actually necessary with a CNG bus, because it's the cleanest-burning carbon fuel that we have today.
In addition to reducing emissions, the CNG engine is considerably quieter than the diesel engine. The numbers we've seen from Cummins Westport indicate that the CNG engine is around 10 times quieter than a diesel engine, so you can imagine that if a bus is sitting and idling, which is the main issue, I guess that bus will be quieter sitting there. The road noise, when it's moving, would be pretty much identical, but as the bus is sitting and idling, that quiet time becomes a significant environmental issue in terms of social impacts in some of the more residential and built-up areas.
Obviously, as David mentioned earlier on, gas supply is plentiful. We've certainly heard there's fuel availability for over 100 years based on current usage, and that's without finding any more gas. So in terms of availability of the fuel, I don't think it's an issue. It's local fuel as well, so there were benefits that we were seeing everywhere. This is not to say that we didn't hit any obstacles. There was public perception about safety. There were concerns about whether or not CNG vehicles can operate in cold weather. There was concern about how many vehicle suppliers were actually available, from a bus supplier perspective. So there were some legitimate concerns.
To try to address some of those concerns, we revised our plan slightly. We revised and expanded it, so we're no longer doing a small conversion of a facility plus 200 buses. We've now decided to progress and build a brand new bus maintenance and storage facility capable of supporting 400 buses. That will be a CNG-compliant facility, so we will be transitioning to 400 CNG buses out of that facility as well.
We're currently with P3 Canada to develop a procurement model for the facility alone. We're hoping for an opening date of somewhere around 2015. That's obviously a little far in the distance, so as a prelude to that, and to try address some of the concerns that we were receiving, we've decided to run a trial of the CNG technology as a proof of concept, so we are procuring six CNG buses this year. The request for proposal was actually closed yesterday and we expect to see probably three of them around October and three of them in spring of next year.
Both major bus suppliers from Canada were the two agencies we targeted. They were New Flyer Industries out of Winnipeg, as well as Nova Bus out of Montreal. We've been working with both those groups to supply the buses. We will be trialing them to see how they work in cold weather. We will be using them as a communications tool for members of the public, and we'll be using them as a familiarity tool for our operators, for our mechanics, and for staff in general.
We intend to run the trial for about 18 months, so we're hoping to run it through two winters. We had an exceptionally mild winter this year, so it wouldn't have helped us in some ways. But we're hoping to get some cold weather simply to prove that this concept works.
In terms of barriers that we face at the moment, I guess our biggest issue is the infrastructure costs needed to convert from a diesel fleet to a CNG fleet. The issue isn't necessarily buying a CNG bus. There is now a premium associated with a CNG bus of about $50,000, but the problem is the infrastructure needed. You need to have significant compressor stations, you need to have significant natural gas storage, and you need to have gas lines of significant pressure brought to the facilities. Those costs are probably the biggest barriers we face right now and that capital cost is probably the biggest barrier to smaller facilities. It's something that probably the City of Calgary is working with, which is why we're looking at a P3 model, but assistance is always needed in projects of that scale when you try to transition from one technology to another.
If we were looking at recommendations here, I think we do need, as an agency, some support for transitioning to a more green fleet-type technology and certainly to alternative fuel methodologies. Maybe there are some interest-free loan schemes that could help with these initial capital costs that could be paid back over time from the fuel savings. There are a number of areas where we could be working with the federal and provincial governments for these more green technologies.
I think there also needs to be more promotion of CNG as a genuinely viable alternative fuel. We see a lot of commercials on TV. We see lots of commercials in newspapers about electric vehicles, about hybrid vehicles. Certainly, for the larger vehicles, there doesn't seem to be the payback that makes it a valid technology, whereas CNG really does provide a solution that is available today. It just requires some infrastructure development.